Citi Upgrades j2 Global To Buy, Recent Decline Adds Shareholder Value

The recent pullback in the stock offers an attractive entry point for new investors in J2 Global Inc JCOM, believes Citi’s Walter H. Pritchard.

The analyst upgraded the rating on the company from Neutral to Buy, while lowering the price target from $82 to $73.

Patent Expirations

Pritchard mentioned that following the renewed controversy regarding near term patent expirations, “additional analysis leaves us more comfortable with patent portfolio behind fax business.”

Pritchard pointed out that while some patents were due to expire only in 2029-2032, medium terms ones had already been litigated.

Related Link: Buy The Dip In j2 Global, Susquehanna Says

“While we expect modest fax decline to sustain, we believe secular growth in Non-DID and op improvements in media can offset, while value is created from M&A,” the analyst stated.

Stock Performance

In addition, while organic growth appeared unlikely to be a key driver of stock performance, Pritchard stated that additional analysis suggested stable or even expanding organic growth for j2 Global.

The stock is expected to continue to be driven by ROIC>WACC, which in turn is expected to be driven by the company’s M&A strategy.

“We expect stable growth/M&A accretion over the course of 2016, with a mid-year debt finance to be positive catalysts for shares,” Pritchard added.